CFD Trading Examples – How CFDs Work

The best way to understand how CFDs work is to follow some examples.

CFD Example: Buying Vodafone

Assume you want to buy 1000 Vodafone CFDs and the exchange price stands at 214.9-215.0p. Your CFD position will be opened at the upper price of 215.0p. The full contract value of this position is 1000 x 215.0p or £2150, but to open the contract you need only put down a margin deposit.

BUY price215.0
SELL price233.3
No. of CFDs1000
Gross profit£183

While your position is open we will adjust your account for overnight financing and any dividends should Vodafone go ex-dividend. (For more information on these adjustments see CFD Trading Costs.)

Suppose a fortnight later Vodafone shares have risen steadily and the market price now stands at 233.3-233.4p. You can now close your CFD position by selling at the bid price of 233.3p. Your commission to close this position will be 0.1% x £2333 = £2.33.

To calculate your net profit you should add or subtract any overnight financing and dividend adjustments.

CFD Example: Selling Wall Street

Suppose you want to go short of Wall Street. Our quote for the cash index has a minimum dealing spread of 1.6 points and might be 22263.0-22264.6. This means that you can sell at 19763.0, the lower end of our quote. One CFD contract on Wall Street is worth $1 per index point. You want to risk $3 per point so you sell three CFD contracts at 22263.0.

SELL price22263
BUY price22139
Difference124 points
Risk per point$3
Gross profit$372

Assume our Wall Street price falls to 22137.4-22139.0 and you decide to close your CFD position by buying at the ask price. Again, there is no commission to pay. To calculate your net profit you should also add or subtract your accumulated overnight financing and any dividend adjustments. For examples of how overnight financing is calculated please see the FAQs.

Next steps

For more detail on margin calculations, and further examples, visit our FAQs. You can discover more about CFD trading in several ways:

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Spread betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 64-72% of retail investor accounts lose money when trading these products with this provider.
You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money.